Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
Oct. 7 — Wells Fargo & Co.'s monthlong struggles continued Oct. 7, when a participant in the company’s 401(k) plan filed a proposed class action challenging a 12 percent drop in the company’s stock price following recent revelations of an illegal cross-selling scheme ( Allen v. Wells Fargo , D. Minn., No. 0:16-cv-03405, complaint filed 10/7/16 ).
The lawsuit follows news last month that Wells Fargo employees had been secretly signing customers up for unauthorized accounts in order to meet internal quotas and keep profits high. Based on these allegations, the bank was fined $185 million, with $100 million of that representing the largest fine ever issued by the Consumer Financial Protection Bureau.
Bringing claims under the Employee Retirement Income Security Act, the new lawsuit alleges that Wells Fargo allowed workers to continue investing retirement savings in the company’s stock, despite knowing that stock price was artificially inflated because of the not-yet-uncovered cross-selling scheme. According to the complaint, Wells Fargo’s stock price nearly doubled during the six-year period of increased cross-selling, before dropping in value once news of the scheme broke.
If recent court rulings are any indication, Wells Fargo plan participant Francesca Allen may face an uphill battle in her attempt to hold the company liable under ERISA. In the past month alone, courts have rejected similar challenges against BP Plc, Whole Foods Corp. and RadioShack Corp. In all three cases, the courts found that employees failed to overcome the high bar recently set by the U.S. Supreme Court for cases challenging stock losses under ERISA.
This most recent suit seeks to hold Wells Fargo liable for losses suffered by as many as 350,000 participants in the company’s 401(k) plan, which holds assets of about $35 billion. In addition to regulatory fines and stock losses, the complaint asserts that the company’s alleged misdeeds have led to significant lost business and “untold reputational damage.”
The lawsuit names several individual Wells Fargo executives as defendants, including Lloyd H. Dean, John S. Chen, Susan E. Engel, Donald M. James and Stephen W. Sanger.
Wells Fargo didn’t immediately respond to Bloomberg BNA’s request for comment.
The lawsuit was filed by Lockridge Grindal Nauen PLLP, Grant & Eisenhofer P.A., Elias Gutzler Spicer LLC and Beasley Allen Crow Methvin Portis & Miles P.C.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the complaint is at http://www.bloomberglaw.com/public/document/Allen_v_Wells_Fargo__Company_et_al_Docket_No_016cv03405_D_Minn_Oc.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)